State regulators have approved a service fee of $1.80 a month for most customers of Appalachian Power Co., which will be used to protect lower-income ratepayers from the increased costs of switching to renewable energy.
In an order last month, the State Corporation Commission allowed Appalachian to collect $25 million annually through the service fee to cover some of the costs of complying with the Virginia Clean Economy Act.
But the SCC did not set an effective date for the fee, ruling that more details — including the question of how many low-income customers would qualify for the program — need to be worked out first.
The fee, which would be added to monthly electric bills, is one of several potential increases for the 500,000-some Appalachian customers in Virginia. The SCC denied a separate request by the utility to raise its base rates by 5% in November but has since agreed to reconsider its decision.
Passed last year by the General Assembly, the Clean Economy Act requires Appalachian and Dominion Energy, the two largest utilities in Virginia, to use all carbon-free sources of electricity by 2050.
Acknowledging that will lead to higher bills, the law created the Percentage of Income Payment Program, which requires Appalachian and Dominion to cap the bills of their low-income customers.
In its Dec. 23 order, the SCC set the following rules for individuals or households that rely on public assistance: Utility customers who do not use electricity to heat their homes would have to devote no more than 6% of their annual income to power bills. For those who use electricity for heat, the most they would pay would be 10% of their yearly earnings.
A single minimum-wage worker with electric heat currently pays nearly 19% of his $15,000 annual salary to satisfy an average monthly bill of $136, along with $100 in outstanding payments, according to the National Consumer Law Center.
The Virginia Department of Social Services and Department of Housing and Community Development are working to determine how many people would qualify for the reduced bills.
Details on that and other aspects of the program, including energy-efficiency measures that would be mandatory for participants, are expected to be addressed at the legislative session that will begin this month.
“The $25 million PIPP revenue requirement could be adjusted up or down in a future proceeding depending on additional information that may hereafter become available, further direction from the General Assembly, and other factors,” the SCC’s order stated.
In SCC filings last year, Appalachian said that the service fee would need to be about $1.12 a month for the average residential customer, or one who uses 1,000 kilowatt-hours per month.
That estimate was made without knowing what the rules of the program will ultimately be, according to Appalachian spokeswoman Teresa Hall. More than a dozen parties participated in an October hearing before the SCC, where testimony was taken.
The higher figure set by the regulatory commission is “an amalgamation” of all the information presented, Hall wrote in an email.
In a separate SCC case, Appalachian estimated that its bills would have to go up by 3.5% over the next five years, as it acquires 210 megawatts of solar power and 200 megawatts of wind power.
Long-term projections, as the utility moves closer to the 2050 goal of all renewable energy, show that bills could increase 55% by 2035. But those calculations, Appalachian has said, “are subject to significant revision and are highly dependent upon assumptions.”
Currently, about 80% of the electricity produced by Appalachian comes from the burning of fossil fuels such as coal and natural gas.